Federal judge rejects U.S. News and World Report’s attempts to obstruct investigation into the company’s undisclosed financial ties to hospitals it ranks
SAN FRANCISCO (May 7, 2024) — San Francisco City Attorney David Chiu issued the following statement after a federal court dismissed U.S. News and World Report’s baseless lawsuit meant to obstruct the City Attorney’s consumer protection investigation into the company’s hospital ranking system and undisclosed financial ties to the hospitals it ranks. Judge William H. Orrick of the U.S. District Court for the Northern District of California denied U.S. News’s request for a preliminary injunction, dismissed all claims against the City Attorney, and granted the City’s anti-SLAPP motion to strike. Anti-SLAPP (strategic lawsuits against public participation) laws are intended to dissuade frivolous lawsuits of this kind designed to chill a defendant’s political or legal rights.
“I am pleased the Court saw right through this legal charade and dismissed the lawsuit entirely,” said City Attorney Chiu. “It’s disappointing that U.S. News chose to waste judicial resources on a red herring lawsuit to evade legitimate questions about its undisclosed financial links to the hospitals it ranks.”
Background
The City Attorney’s Office discovered last year that U.S. News accepts payments from the entities it endorses without disclosing those financial links. In order to prevent the public from being misled, Federal Trade Commission regulations interpreting the Federal Trade Commission Act require disclosure. U.S. News receives revenue from hospitals through licensing fees to use its “Best Hospitals” badges, subscriptions to access the granular data underpinning the rankings, advertising on U.S. News’s website and in the Best Hospitals Guidebook, and payments for “Featured Hospital” placement. This funding is significant, with at least one hospital acknowledging that it paid U.S. News $42,000 to use the “best hospitals” badge for one year.
U.S. News markets itself as an expert on ranking hospitals. It claims it is “the global authority in hospital rankings” and has been “helping patients and families find the best healthcare for more than 30 years.”
U.S. News’s hospital rankings affect many people’s healthcare decisions, including Californians. The company claims that more than 40 million people visit its website every month, with others buying its annual Best Hospitals Guidebook. Health experts around the country have questioned whether—contrary to the company’s representations of authority—U.S. News’s hospital ranking methodology is misleading patients and warping the health care system to the detriment of poorer, sicker, and more diverse patients.
The impact of U.S. News’s representations about its hospital rankings on Californians, along with the undisclosed financial ties to the hospitals that U.S. News ranks, led City Attorney Chiu to initiate an investigation in June 2023 into potential violations of California law. California’s Unfair Competition Law (UCL) prohibits unlawful, unfair, and fraudulent business practices as well as unfair, deceptive, untrue, or misleading advertising. Certain city attorneys in California, including the San Francisco City Attorney, can send subpoenas or letters of inquiry and file lawsuits on behalf of the People of the State of California to protect consumers and ensure fair competition among businesses.
In response to the City Attorney’s letter sent in June 2023, the company did not respond to the reasonable questions about potentially misleading consumers, and it has refused to address the payments it receives from hospitals the company ranks. As a result, City Attorney Chiu sent two subpoenas to U.S. News in January 2024 to obtain the necessary information to determine the scope of the company’s potential violations of California consumer protection laws.
Rather than take the reasonable course of requesting an extension on the subpoena or utilizing the available procedures under California law to raise objections to the subpoena, U.S. News chose to preemptively file a flimsy lawsuit and preliminary injunction motion claiming that a legitimate government investigation into potential unlawful business practices violated the company’s First Amendment rights.
The Court described this strategy in its decision: “U.S. News did not seek to meet and confer with the City Attorney after the Subpoenas were served. Instead, it filed this lawsuit on January 23, 2024, the day before the deadline to respond to the Subpoenas.”
U.S. News’s meritless lawsuit directly interferes with the City Attorney’s duty to investigate potential violations of California consumer protection laws. Due to possible implications of U.S. News’s lawsuit, 18 local jurisdictions and officials from across the country, and local government organizations, filed an amicus brief in support of the City.
Judge Orrick affirmed the City Attorney’s ability to conduct a legitimate investigation into violation of California law: “No one contests that the City Attorney issued the Subpoenas in furtherance of his official responsibilities, which include the right to investigate entities that he believes may be violating California law.”
The Court also granted the City’s anti-SLAPP Motion to Strike. Anti-SLAPP laws provide defendants a way to dismiss meritless lawsuits filed against them for exercising their political or legal rights. U.S. News’s lawsuit was an attempt to prevent the City Attorney from exercising his authority to investigate. U.S. News is required to reimburse the City for fees and costs incurred in connection with the anti-SLAPP motion.
The case is U.S. News & World Report, L.P., v. City Attorney of San Francisco David Chiu, U.S. District Court for the Northern District of California, No. 3:24-cv-00395-WHO. The decision can be found here.
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